2017 Investor Roundtable:General Discussion

[SteveG3]

Given the long timeframes we are talking about, it seems increasingly likely that we will see Chinese manufacturers with EV production capacity and experience improve their designs and quality and, together with Tesla, knock many of the legacy manufacturers out of the market or absorb their brands ala Geely/Volvo.

Yeah, the incumbent automakers attempts to kick this transition down the road pretty much as far as possible creates a vacuum the Chinese are onto and happy to try to fill. I'd imagine this was a substantial part of the plans being made to ban ICE vehicle sales in China. That is, in addition to responding to environmental concerns, try to steer their auto industry towards making a big run for the massive opening to take market share from the established automakers.

 

[JRP3]

He was high and turned in front of oncoming cars.

THC in the blood does not mean he was high, THC stays in the system for a long time.
How Long Does Weed Stay In Your System?
Unless he blazed up within an hour or so of getting behind the wheel he would no longer be high. Or so I've heard...

 

[SteveG3]

VA, black line crossing with blue chart you posted is a good place to start analysis and discussion as to how soon that will really come to pass.

(snip)

I'd be interested to hear members opinions on what year the lines may actually cross given the many recent decisions, facts, etc. which we think have some degree of influence on speed of EV overtaking ICE. For what it is worth (not much) I think 2030 is a much more realistic date than 2025, because the only players fully committed to making it happen faster are Tesla and the Chinese gov't industrial complex. The latest mixed messages from VW are a case in point. EinEV posted the latest statement from VW saying they plan to only produce 1M EVs by 2025! There has been lots of we're going EV statements from the ICE majors the past few months. But as frequently observed on TMC, few of them have announced they'll be building the massive GigaFactories needed to supply the batteries needed to make 50% of the cars they make electric. They seem to think that third party companies will be financing and building the GFs to supply them.
Does anyone have facts or analysis that the Chinese battery companies can expand fast enough to both meet internal Chinese EV demand AND supply batteries for 20 - 30 million non Tesla EVs ?

This is why my WAG at the moment is on or around 2030. I want and the world needs sooner. I'll be grateful to anyone who can put together what we know to convincingly argue earlier can or will happen. Before you reply VA, don't forget the convincingly part!

I think it helps to think about this question in terms these groupings of potential coming sources of long range EV supply.*** :

Tesla: Elon pushes very very hard, but I still think 6-8 million units per year in 2025 is about the upper bound of what's possible. As an investor, the good news is, I think they will continue growing at a very rapid pace for many years past that and, so longer term, numbers like 15 million per year seem reasonably possible to me.

China: What's key here, is that along with Tesla, this is the only currently known potential major needle mover that actually wants to move to EVs. This seems quite so for both Chinese government, Chinese industry and investors, and the overlap of these groups. That is a major plus, and when China moves they can move very fast. I think more long range EVs will be produced in China by 2025 than by Tesla worldwide. How many I haven't done any hard research, but, extrapolating from what I know about Tesla, and battery supply, I would think 10-15 million is about the upper bound. Downside re China's involvement, they have a wall of consumer skepticism to climb in terms of selling EVs in the EU, Japan, and North America. Hard to say how long it would take to climb that wall, but, they appear to be given a huge incentive to work on climbing that wall given the way the global incumbents are trying to kick transitioning to EVs down the road. Consumers in North America, etc., may rapidly start being open to Chinese made vehicles by about 2025, but, I doubt there will be substantial sales of Chinese EVs in those markets by then. 2030? Could be 30 million plus, particularly if a Chinese ICE ban takes effect by then.

Worth noting, 1) this will both pull into EV market the traditional ICE makers from around the globe who want to do business in China and need to prepare for a Chinese ban on ICE, 2) this Chinese interest is also behind a very large portion of the EV startups in the West (EV startups discussed below).

Incumbents- Luxury They are most impacted by Tesla. Though they have not seemed to want to make this move, they seem more and more real about doing it. Still not always so clear about pure EV vs. "electrified." If the global market for luxury vehicles is about 10 million a year (talking head this week tossed out that number, and it seems reasonable considering BMW, Daimler volumes), I would think roughly 2-4 million will be pure EVs in 2025, and roughly 5-8 million in 2030.

Incumbents- Broader Market well, the CEO of VW, which Elon singled out as the incumbent most swiftly moving to EVs, had this to say yesterday,

"There's going to be a co-existence between combustion engines and electrified drive systems over the next 10 to 20 years, so against this background we should all be patient and relaxed and leave the decision to our customers, they should decide which concept they prefer,"

and, Toyota's CEO a week ago said,

“I must say up front that we’re not against electric vehicles. But in order for electric vehicles to cover long distances, they currently need to be loaded with a lot of batteries that take a considerable amount of time to charge... we’re skeptical there would be a rapid shift to pure electric vehicles, given questions over user convenience.”

i.e,, pretty much obfuscation, but a step in the right direction from telling us all how HFC vehicles are the future.

The extent VW moves forward will influence the other broad market players, but, I'm skeptical we see more than 3-5 million from this group combined by 2025. Things may well start really moving by that point, so, perhaps 10-15 million from this group by 2030.

EV startups At best from this group we've seen an uneven effort. Then there is the question of ramping. On the plus side, it makes sense for entrepreneurs to be drawn in, and there's a good number of these startups, and there will likely be more. Also on the plus side, money and various kinds of ties to the companies involved in the much bigger EV movement in China. On balance, I doubt as a group they break 100,000 per year in 2020, 1 million in 2025, 5 million in 2030.

Massive Tech New Entrant Last we heard Apple has pulled back from actually making a car. They could change their mind, and/or other similar companies could take the plunge in the coming years. Unless there's a secret project underway at one of these, which I find very unlikely, I doubt that even these behemoths could have a material impact by 2025. By 2030, as a group, something like a 5-10 million contribution seems possible to me, but that's based on a speculative scenario that some jump in.


So, overall, I don't see us getting beyond 15-20 million long range EVs in 2025, but, we could pass 50 million and 50% of market share by 2030. I think that's roughly where we will be in 2030, but, my gut is we will be a little shy of that number, and cross 50% a few years after that.


*** I think of this question in terms of long range EVs, but, with possibilities like autonomous fleets, and even hyperloops, on the horizon, the apple cart could be very well tossed over (i.e., it's far easier to ramp volume for 80 mile EVs than 300 mile ones, and my rough assumption of a 100 million total vehicle market in 2025, flat to up 10-20% in 2030, could be off quite a bit in either direction).

 

[EinSV]

@SteveG3, great post!

Two areas where I think EV production could increase faster than you propose:

(1) Elon said Tesla eventually will have 10, 12 maybe 20 GFs. Even leaving aside a significant volume for Tesla Semi and TE, that's likely to produce a lot more than 6M cars. Timing is obviously an issue, but with locations for GFs 3, 4, 5 and maybe 6 scheduled to be announced later this year things could start moving very quickly, especially if there continues to be a vacuum with no serious competition.

(2) Chinese manufacturers. Yes, there will consumer skepticism initially but that can change quickly. Japanese cars were barely a blip on the screen in the U.S. in the early 70s. The oil embargo was 1973. and Japanese manufacturers had the good luck to be selling the small, fuel efficient cars that people wanted. By 1980 Japan was selling more cars worldwide than U.S. manufacturers, and in 1981 Japanese manufacturers were "voluntarily" limiting the number of cars imported in the U.S. to protect the struggling U.S. industry. Automotive industry in the United States - Wikipedia As a kid growing up in Detroit it was pretty shocking to see how fast the transition was. We could easily see a repeat with Chinese manufacturers who find themselves in the right place at the right time selling EVs that all of a sudden everyone wants.

If needed, they can follow in Geely's footsteps and buy up a few more Euro brand names to add a little panache and they're off to the races.

 

[Ugliest1]

<snip>... in that Tesla is selling this feature to customers with very little known about when it will actually happen. There could very well be people with 2/3 year leases that will *never* see a feature they paid for. And we all know that AP v2.0 hardware buyers basically missed out on an entire year of AP v1 parity, more if you count the cursed automatic wipers.

At the very very least, we should be asking the question, "Is it disingenuous for Tesla to offer this FSD feature?"

Now I know if something happens, those customers will be refunded that money, but still.....

IMO, from what I've seen on the website Tesla gives enough for someone to read between the lines. But they're definitely not discouraging paying now for a hamburger on Tuesday. Do I have a problem with it? I think it's more up to the buyer to make the choice, and if they're new to Tesla and think it's going to be delivered on Tuesday, that's their problem for not doing some due diligence. I've just gone over EAP and FSD with some friends who'll be pulling the trigger probably next week, and my advice was don't buy FSD because it's not here yet (my standard advice, if anyone asks).

 

[techmaven]

On Reddit: Tesla Model 3 Production line • r/teslamotors

15 cars a day right now and climbing (450/month). Seems to be right on time, depending on how fast the production rate is climbing.

Imgur: The most awesome images on the Internet

From the post:

 

[SteveG3]

@SteveG3, great post!

Two areas where I think EV production could increase faster than you propose:

(1) Elon said Tesla eventually will have 10, 12 maybe 20 GFs. Even leaving aside a significant volume for Tesla Semi and TE, that's likely to produce a lot more than 6M cars. Timing is obviously an issue, but with locations for GFs 3, 4, 5 and maybe 6 scheduled to be announced later this year things could start moving very quickly, especially if there continues to be a vacuum with no serious competition.

(2) Chinese manufacturers. Yes, there will consumer skepticism initially but that can change quickly. Japanese cars were barely a blip on the screen in the U.S. in the early 70s. The oil embargo was 1973. and Japanese manufacturers had the good luck to be selling the small, fuel efficient cars that people wanted. By 1980 Japan was selling more cars worldwide than U.S. manufacturers, and in 1981 Japanese manufacturers were "voluntarily" limiting the number of cars imported in the U.S. to protect the struggling U.S. industry. Automotive industry in the United States - Wikipedia As a kid growing up in Detroit it was pretty shocking to see how fast the transition was. We could easily see a repeat with Chinese manufacturers who find themselves in the right place at the right time selling EVs that all of a sudden everyone wants.

If needed, they can follow in Geely's footsteps and buy up a few more Euro brand names to add a little panache and they're off to the races.

Thanks EinSV. Not to nitpick, but, I think our views on these points are actually quite well in agreement, lols.

Re point 1), my 2025 upper bound was 6-8 million, and that would take quite a few more GFs being added (we have good reason to think more than GF 3, 4, 5 being added). Re Elon's eventually suggesting 10, 12, maybe 20 GFs eventually, I think my comment about in time 15 million per year being reasonably possible is of the same rough scale. If they keep calling solar panel/roof manufacturing plants GFs, my number may be more bullish than Elon's comment points to. Of course, we don't know if all GFs will be the same size, or what the output of ones designed years from now will be... so, maybe Elon's number is more bullish.

As to your second point re China, I noted it was hard to predict, and then suggested, consumers in established markets "may rapidly start being open to Chinese made vehicles by 2025." Outside of I believe Volvo first selling some cars this year in the US that were manufactured in China, Chinese made vehicles, ICE or EV, are not even a blip on the screen yet. We're probably a few years from seeing that blip. So, I don't think I'm forecasting something along the lines of the pace of acceptance as Japanese vehicles.

 

[FredTMC]

On Reddit: Tesla Model 3 Production line • r/teslamotors

15 cars a day right now and climbing (450/month). Seems to be right on time, depending on how fast the production rate is climbing.

From the post:

Looks like he pulled the images.

Techmavern, do you think the pictures were the actual general assembly line ?

OR, just the existing temporary preproduction line they've been using to date?

Thanks!

 

[techmaven]

Looks like he pulled the images.

Techmavern, do you think the pictures were the actual general assembly line ?

OR, just the existing temporary preproduction line they've been using to date?

Thanks!

Too hard to tell... these pictures are taken in a way to block out a lot of the details... the actual assembly portions are not in the frame. If I were to guess, I'd say these are BIW.

 

[Alketi]

Looks like he pulled the images.

Techmavern, do you think the pictures were the actual general assembly line ?

OR, just the existing temporary preproduction line they've been using to date?

Thanks!

Someone apparently copied the pics. I don't see much, but here they are.

 

[techmaven]

Obviously the problem is that we don't know the rate of increase. Are they doubling the rate every week? Every few days? Every month? We don't know.

 

[Bobfitz1]

@SteveG3, great post! Two areas where I think EV production could increase faster than you propose:

(1) Elon said Tesla eventually will have 10, 12 maybe 20 GFs. Even leaving aside a significant volume for Tesla Semi and TE, that's likely to produce a lot more than 6M cars. Timing is obviously an issue, but with locations for GFs 3, 4, 5 and maybe 6 scheduled to be announced later this year things could start moving very quickly, especially if there continues to be a vacuum with no serious competition.

(2) Chinese manufacturers.
If needed, they can follow in Geely's footsteps and buy up a few more Euro brand names to add a little panache and they're off to the races.

Great post indeed @SteveG3, thank you. @EinSV, both your points are reasonable but I'll question each as follows.

1. Steve estimates 6 - 8 M from Tesla by 2025. I think that is consistent with them bringing 5 or more new GFs online before 2025. I don't think they can bring twice that many online by then to be making over 7 or 8 M by that time. In thinking about more and more GFs and how much cost, time and effort is required, I have to keep reminding myself that Tesla seems to be planning for these to be battery AND car assembly factories. Common sense suggests that these GFs are going to need more time, effort and Cap Ex than putting up copies of GF1 for battery production alone. If this is correct we'd be over optimistic to think a half dozen of these GFs can be cranked out every 3 or 4 years. I do believe from 2025 out to 2030 and beyond, Tesla will be able to bring bigger and faster factories out at a faster pace.

2. I don't think Western consumer skepticism is the major barrier to China selling tens of millions of EVs in Europe and U.S. by 2025.
I suspect they can't build up that much capacity that fast. I have a sense that many assume the Chinese Gov't Industrial complex can do anything they decide to do, faster than any of us can predict. I don't think that's likely correct. Even they cannot sprint before crawling , walking, running first. Japanese auto makers made very rapid inroads into the U.S. market because they were already making the type of cars Detroit refused to build. They just needed to increase production of the fuel efficient models they were already producing. I think it would be more difficult for China to penetrate the U.S. market that fast with EVs since they are themselves moving from ICE to EV production. I'm hoping Tesla can grow so fast and continually improve its EVs, so that China doesn't wind up supplying half or more of EVs bought in the U.S. in the coming 20 years.

 

[FredTMC]

Too hard to tell... these pictures are taken in a way to block out a lot of the details... the actual assembly portions are not in the frame. If I were to guess, I'd say these are BIW.

certainly BIW for some of those pics. Like the quarter panels lying around. Those get put together with the car in the BIW

Another thing to notice is that a number of the pics have workers in hard hats and yellow construction vests.

Based on this, seems to me those workers are doing Line Setup and configuration testing You can see ladders laying on the floor and caution cones and scrap tubing etc. definitely testing. Advanced testing I should say. Robots and support equipment in place AND tesla body panels lying around used in testing of the BIW robot line.

You can even see one picture where there's a completed BIW car on a red dolly

Can anyone pull date time stamps on these photos?

 

[jhm]

I can provide a little context on the BNEF EV forecast as I had the opportunity to listen to their client call when they made their EV update. The curious part of the forecast is that, despite crossing all sorts of important tipping points now and in the next few years, the forecast actually calls for a significant slow down in the market growth rate for the early 2020s and mid 2020s. So, from 2017 to 2025 they expect the global market for new EV sales to grow 30% to about 23M new from about 936k in 2017. And, their 2040 goal forecast for new EV sales is predicated on a 20% CAGR to 62M vehicles in 2040. But in 2020 and 2021 they see low double digit growth only, why?

Nominally, the biggest reason they provide is urban EV infrastructure. They see people in big urban areas like London having difficulty charging. This is what makes Tesla's city supercharging announcement so interesting and worthwhile to watch.

However, I think there is a second unstated reason at work. BNEF is the most aggressive mainline energy consultancy on the growth of electric vehicles. They are much more aggressive than IEA, Wood Mack, Shell, etc. If EV penetration is faster than the mainline forecasters predict, BNEF still looks good. There is not much of an institutional reason for them to be more aggressive still. This fact showed through on the call as well. If anything, the analysts were implying that growth is much more likely to beat their forecast than miss it.

If you do that math on Elon's forecast for new US EV sales -- half of the market in a decade -- it implies about a 40% CAGR over the decade. This is no lay up, but I think it's quite possible we'll get there. The global EV market has sustained a 40% CAGR in the last three years even though oil prices were cut in half. And now, we are crossing important pricing points on lithium ion batteries that imply a tipping point in favor of EVs. So, there are lots of reasons to believe that EVs could sustain a 40% CAGR over the next decade. It's as if there is a black swan swimming around plain for everyone to see, but most people are looking past it.

Excellent. I hope you join our discussion in the Shorting Oil Hedging Tesla thread. We've been puzzling over the motivations of various analysts. Indeed doubling every 2 years is sufficient to get to peak oil by 2025. It is a black swan in plain sight.

 

[TMSE]

Not sure if it has been posted already. Short interest as of 8/31 went up to 29.2 million shares sold short. http://www.nasdaq.com/symbol/tsla/short-interest

 

[Buddyroe]

Man, I seriously hate the WSJ. I signed up for their trial just so I could post comments on Tesla and SpaceX articles. I knew they were quick to point out negatives about Tesla/SpaceX, but I didn't realize just how bad it was. Over the last 2 months, every time Tesla or SpaceX has had ANY type of good news, not a word from the WSJ. I even used their search functionality to check. Crickets. Nada.

So, just as I knew would happen, right when the crash report came out, there was the WSJ jumping all over it. How can people be so naive and read/believe their garbage?

Being a conservative libertarian, I've always noticed the bias in the MSM. But, I only realized it exists equally as bad on both sides about 5 or 6 years ago when I began to learn about Tesla. Hearing Fox News bash Tesla for getting a govt loan - with no mention that Ford also received a 15 times larger loan from the same program - really opened my eyes to the truth that EVERYONE has a damn agenda and you can't believe anything. Best to go check for yourself.

Can someone, ANYONE please explain why an American company would hate an American company so much? Their hate is so bad, it's obvious. Makes me sick!

 

[SteveG3]

Man, I seriously hate the WSJ. I signed up for their trial just so I could post comments on Tesla and SpaceX articles.

(snip)

Can someone, ANYONE please explain why an American company would hate an American company so much? Their hate is so bad, it's obvious. Makes me sick!

crony capitalism

and

what may be perceived (correctly or not) as a "team D" win is to be bashed... not picking on Rs, I see this happening in both directions

 

[FredTMC]

crony capitalism

Tesla doesn't buy Ads on WSJ. Other auto manufactures do

I agree though that it's horrible what WSJ does.

And now Ruberts son is on Tesla's board. Crazy world

 

[jhm]

VA, black line crossing with blue chart you posted is a good place to start analysis and discussion as to how soon that will really come to pass. How long ago did EM say he thinks they will cross in 2025? Unless it was earlier this year, there have been plenty of developments since that would influence the answer he'd likely give today. Every week now there are new ICE company and government statements that may influence what year they do cross. I'm sure you realize that Elon was not saying Tesla would get world EV sales to the crossover point alone. I believe he occasionally tosses off remarks of this sort to make the point that the ICE to EV transition COULD happen much faster than projected by those with far less imagination and determination. Even with Tesla pulling out all stops in the next 7 years the most they can produce is in some range of 8 to 15 million EVs. Say 20% of 50M. That means for the lines to cross by 2025, 80% of the heavy lifting must be done by Chinese companies and the current large ICE manufacturers. Tesla can't force all the decisions and actions by other players needed for the lines to cross sooner rather than later. All Tesla can do is act as the best possible catalyst for faster action.

I'd be interested to hear members opinions on what year the lines may actually cross given the many recent decisions, facts, etc. which we think have some degree of influence on speed of EV overtaking ICE. For what it is worth (not much) I think 2030 is a much more realistic date than 2025, because the only players fully committed to making it happen faster are Tesla and the Chinese gov't industrial complex. The latest mixed messages from VW are a case in point. EinEV posted the latest statement from VW saying they plan to only produce 1M EVs by 2025! There has been lots of we're going EV statements from the ICE majors the past few months. But as frequently observed on TMC, few of them have announced they'll be building the massive GigaFactories needed to supply the batteries needed to make 50% of the cars they make electric. They seem to think that third party companies will be financing and building the GFs to supply them.
Does anyone have facts or analysis that the Chinese battery companies can expand fast enough to both meet internal Chinese EV demand AND supply batteries for 20 - 30 million non Tesla EVs ?

This is why my WAG at the moment is on or around 2030. I want and the world needs sooner. I'll be grateful to anyone who can put together what we know to convincingly argue earlier can or will happen. Before you reply VA, don't forget the convincingly part!

I see EV crossover happening by 2028, maybe sooner. Doubling every 2 years gets to 50M by 2028. But there is also the possibility that ICE sales will decline before EV production volumes can replace them. So logistic models of market share can be more aggressive about reaching 50% penetration.

 

[SteveG3]

I see EV crossover happening by 2028, maybe sooner. Doubling every 2 years gets to 50M by 2028. But there is also the possibility that ICE sales will decline before EV production volumes can replace them. So logistic models of market share can be more aggressive about reaching 50% penetration.

that begs the question, what's your case for EV sales doubling every 2 years as an input? I hope your case speaks to the fact that if Tesla's sales are removed from the current total, there would currently be roughly 12,000 long range EV sales, ever, from all manufacturers on the planet combined. fwiw, as to the below long range EVs, their sales growth rate has been anemic compared to 50%, and possibly negative in some recent years.